Twenty-five billion dollars in tax revenues are lost every year, according to a report submitted by the independent Parliamentary Budget Officer in 2019, or a staggering one per cent of Canada’s GDP.
The provinces have asked for an additional $28 billion in health care transfers from the federal government. If our tax laws didn’t leave gaping loopholes for tax avoidance by the ultra rich and the biggest corporations, this would be a simple feat as we’d only need to look for $3 billion in extra revenue.
The International Consortium of Investigative Journalists, including Canada, are doing their best to end the secrecy around the world’s biggest, richest and most powerful corporations and individuals from hiding their wealth.
Unfortunately, not only are tax havens legal, they include ‘respectable’ countries such as Switzerland, the Netherlands, Luxembourg, Ireland, Barbados, Cayman Islands, Bermuda, British Virgin Islands and Singapore.
The argument made over the last 40 years was that if we reduce taxes at home, fewer corporations and the ultra-rich would use tax havens. Today we know that thinking was a fantasy.
It’s Canadian tax dollars that provide a highly-educated and healthy workforce for industry through public education and health care. It’s taxpayer-funded transportation and communications infrastructure that enables global companies to deliver their goods and services efficiently. It’s Canadians that generate the profits for these corporations.
How then does it make sense that giants of global industry pay little to no taxes in Canada by transferring their profits to ‘legal’ tax havens?
Some important progress was made on this file recently when 136 countries, representing 90 per cent of the global economy, reached a deal on corporate minimum tax for big global companies. These would include global giants such as Pfizer, Walmart and Apple, all of which use off-shore, tax-avoidance loopholes. They are joined by politicians, celebrities, religious leaders and gangsters, with the help of global giants in accounting, legal and banking who also reap huge financial rewards by being the architects and facilitators of elaborate tax avoidance schemes.
Perfectly legal, but morally corrupt—a parallel financial system, one for the haves and one for the have nots.
There’s lots of ways to stop tax havens and tax avoidance. The minimum international corporate tax, if it survives, is a start. But Finance Minister Chrystia Freeland, isn’t banking on its success. She has moved ahead with legislation to enact A Digital Services Tax on January 1, 2024, retroactive to 2022, to catch social media giants who are also giants in tax avoidance. It’s a ready-to-go replacement should the international minimum tax deal fall apart.
Other moves in the right direction include the Liberal’s promise to tax excessive profits made by the banking and insurance industry. Freeland is increasing the number of auditors at Revenue Canada to recover from the costly mistake of reducing auditors to ‘save’ money. As Arthur Cockfield of Queen’s University said, “it’s an easy slip from tax avoidance to tax evasion”.
Minister Freeland should also consider re-writing the tax laws to tighten up and close glaring tax loopholes that encourage the use of tax havens. She could introduce a withholding tax on all money sheltered in recognized tax havens. Even better, she could make illegal these oft-used fictitious numbered ‘shell’ corporations. They have no economic substance and are only used to conceal the true owners, often for nefarious reasons.
Ownership transparency goes a long way to stopping bad behaviour in the corporate world.
Every dollar hidden in offshore accounts, and all Canadian-generated profits moved offshore to be taxed, represents billions of dollars lost annually.
Therein lies the answer to why we don’t have enough revenue to meet increasing needs in healthcare, education, transportation and communication infrastructure, and social programs.
Brenda Schimke
ECA Review
